Correlation Between Bank Rakyat and Garuda Indonesia
Can any of the company-specific risk be diversified away by investing in both Bank Rakyat and Garuda Indonesia at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Bank Rakyat and Garuda Indonesia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank Rakyat Indonesia and Garuda Indonesia Persero, you can compare the effects of market volatilities on Bank Rakyat and Garuda Indonesia and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Bank Rakyat with a short position of Garuda Indonesia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Rakyat and Garuda Indonesia.
Diversification Opportunities for Bank Rakyat and Garuda Indonesia
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Bank and Garuda is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Bank Rakyat Indonesia and Garuda Indonesia Persero in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Garuda Indonesia Persero and Bank Rakyat is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Bank Rakyat Indonesia are associated (or correlated) with Garuda Indonesia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Garuda Indonesia Persero has no effect on the direction of Bank Rakyat i.e., Bank Rakyat and Garuda Indonesia go up and down completely randomly.
Pair Corralation between Bank Rakyat and Garuda Indonesia
Assuming the 90 days trading horizon Bank Rakyat Indonesia is expected to generate 0.53 times more return on investment than Garuda Indonesia. However, Bank Rakyat Indonesia is 1.89 times less risky than Garuda Indonesia. It trades about -0.16 of its potential returns per unit of risk. Garuda Indonesia Persero is currently generating about -0.11 per unit of risk. If you would invest 476,000 in Bank Rakyat Indonesia on August 27, 2024 and sell it today you would lose (27,000) from holding Bank Rakyat Indonesia or give up 5.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank Rakyat Indonesia vs. Garuda Indonesia Persero
Performance |
| Timeline |
| Bank Rakyat Indonesia |
| Garuda Indonesia Persero |
Bank Rakyat and Garuda Indonesia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank Rakyat and Garuda Indonesia
The main advantage of trading using opposite Bank Rakyat and Garuda Indonesia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank Rakyat position performs unexpectedly, Garuda Indonesia can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Garuda Indonesia will offset losses from the drop in Garuda Indonesia's long position.| Bank Rakyat vs. Bank Central Asia | Bank Rakyat vs. Bank Mandiri Persero | Bank Rakyat vs. Bank Negara Indonesia | Bank Rakyat vs. Telkom Indonesia Tbk |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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